The collapse of a small software provider could leave Telecom without valuable codes it needs to update and protect its XT mobile phone network from "bugs and faults".

The receiver of Aldous Limited, an international software development company whose New Zealand branch failed in April, wants to sell the company's assets to satisfy its creditors.

According to receivership documents British investor Jurek Piasecki is owed more than $8.7 million under a general security agreement, which accounts for the majority of the company's debts.

The receiver is attempting to sell Aldous' assets, including the source code on which Telecom's XT network is built, and there is already one potential buyer according to the receiver's lawyer Daniel Hughes.

In the High Court at Auckland this morning, Telecom counsel Sally Fitzgerald said that without the code Telecom would not be able to update the types of handsets which could be used on its XT network, nor would it be able to introduce new pricing schemes or fix bugs and faults in the system as they arose.

The code was also integral to decomissioning XT's predecessor CDMA network, which "may need to cease" if it was not available, she said.

Telecom is seeking an injunction against the sale of Aldous' intellectual property assets until a court can decide who has legal right to them, particularly the XT network source code.

Fitzgerald said the software had been customised so much over the past ten years that it was "completely bespoke" to Telecom and would take another company at least 18 months to develop any product or service using it.

But Hughes argued that Piasecki's secured claim over the company's assets, which was properly registered with the Companies Office, outranks Telecom's contractual claim to the software.

However, Fitzgerald said Aldous had failed to comply with an "escrow" agreement which asked it to lodge updated versions of the source code with a third party trustee, and the company was therefore in breach of contract.

Telecom said it only wanted copies of the code so it could carry on its business and was willing to pay the cost of extracting and copying the code.

However, an Aldous employee who was made redundant yesterday was quoted as saying the cost could be as "long as a piece of string".

Judge Peters reserved her judgement on the interim injunction and a date for the substantive hearing is due to be set tomorrow.